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Policy Analysis No. 551

Saving Money and Improving Education: How School Choice Can Help States Reduce Education Costs

By
David F. Salisbury

October 4, 2005

Executive Summary

Historically, elementary and secondary education has been the largest item in state budgets. During the past three decades, state spending on public education has grown both in terms of revenues spent per pupil and as a percentage of total personal income. Spending on K–12 education is expected to continue to rise during the next few years, mainly because of the increased number of teachers and other school personnel that will be needed to meet increased enrollment.

In view of the large share of state budgets devoted to public education and the cost increases expected in the future, it is appropriate to ask how state policymakers might reduce the rate of growth of local and state spending on education. One of the most promising means for doing so is school choice. To demonstrate the potential impact of school choice on state budgets, this paper draws from legislative and independent evaluations of the fiscal effects of such programs in the states that have enacted or are contemplating enacting them.

Results from existing programs in Arizona, Milwaukee, Cleveland, Florida, Pennsylvania, Maine, and Vermont indicate that school choice makes fiscal sense. In addition, analyses of proposed school choice programs in Utah, South Carolina, New Hampshire, Baltimore, and Virginia conclude that those programs would save money and give an idea of the savings that could result from similar programs in other states.

Thus far, much of the debate over school choice has focused on the educational benefits it could bring. It can bring significant fiscal benefits as well.